Monday, June 19, 2017

The REAL Reason Too Many Companies Can't Find Good Workers

Two recurring puzzles to do with the current job market are: 1) Why are so many job openings going unfilled? and 2) Why does wage stagnation remain entrenched? It is also possible to inquire if the two are somehow related, i.e. are relatively low wages for certain jobs (e.g. STEM occupations, in science, technology, engineering, math) putting workers off applying for them?

In respect of (2), Lauren Weber, in a recent WSJ piece, noted that a "global market" is one factor holding U.S. wages in check. In effect, factory workers in Pennsylvania compete for jobs not only with each other but also in China and Mexico where wages are lower. Nothing Trump has done up to now has changed that in a significant way.

Weber also investigated why so many companies are having a difficult time filling their openings. What she found was the "companies are reluctant to raise pay, in part to protect their profit margins". They also prefer right now to have more money set aside to buy back their own shares if it can help their bottom line, increase share prices.

According to managing director of Aspen Advisors, Andrew Gadomski, that is "holding back hiring". He notes that when companies lament they can't find workers to fill key openings, that is code for: "I can find talent, I just don't want to pay them as much as they cost."

In other words, these employers are quite capable of finding the workers with the background they need, they just don't want to pay them what they are worth. Well, what's an employee to do? The answer is to either stay out of the cheapskate job market until employers shape up, move to another location to find a similar job, or perhaps look at changing skills, professions. (Though there is no guarantee the same cheapskate bosses won't dominate other areas too)

Note also that this is despite job openings being at "all time highs" according to Beth Ann Bovino, chief U.S. economist for S&P Global Ratings. Thus: "Businesses are struggling to fill these positions in an increasingly tighter market." As per a Denver Post article highlighting the situation ('Sounds of Silence Greet Colorado Employers Looking for Summer Help', June 11)::

"Steve Homolka needs to hire just five workers this spring to help him with his family masonry-staining business.Finding them has proven much more difficult than he ever imagined. And it isn’t about unqualified applicants. Nobody is responding to the numerous ads he has posted on Craigslist, Facebook, Instagram and other sites."
Thus, it appears that there is a surfeit of positions but not enough takers. But why aren't there takers? Is it that the qualified employees don't exist, or not enough, OR is it because the companies aren't prepared to pay a proper remuneration? In the Colorado example cited above, it may just be that summer work is an insufficient lure and people (e.g. college grads) want something a tad more long term to be able to move out of the family basement.

In the more general context employers may simply be cheapskates and unwilling to part with good money for good talent, whatever the job. This is apparent given the remark ("I just don't want to pay them as much as they cost.") of the employer cited by Andrew Gadomski. In other words, the companies have brought this situation on themselves.

Adding to that is what employers often view as a labor shortage is in reality a retention problem, this also according to Gadomski. Obviously if you are losing workers - chasing better pay or benefits - you have to replace them. This is especially the case now when employees are willing to jump ship for a raise after many years of being expected to work harder - but getting only ulcers and overtime offers for their trouble.

Again, it is evident that the companies have largely brought their predicament on themselves. To substantiate that, Weber reports that "workers are voluntarily quitting jobs this year near the highest rate since the recession ended". This according to Labor Department data.

While the stinginess of employers could well explain the lack of openings filled in skilled occupations, e.g. STEM jobs (in Colorado last year there were 15.3 openings for every potential candidate), this may not translate to the lower wage domain. Here, the attacks on immigration and immigrants by the Trumpies could account for labor shortages in agriculture, for example. An open question in the vast agro fields of California and Florida is 'who is going to pick the produce now?' The working class unemployed white Americans aren't prepared to go into the fields, so who will?

Similar labor shortages apply in landscaping as well as construction with thousands of jobs going begging here in Colorado alone. The unemployment rate in CO is currently 2.3 %, the lowest in the nation. In metro Denver, labor markets are even tighter, with the unemployment rate dropping down to 2.1 percent. Much of this has been on account of an influx of over 20,000 millennials to grab any jobs they can in the banking, energy, or MJ sectors. The problem is that these newcomers have basically left the door "closed" for others unless they want to take a seasonal- only job. (See above)

Meanwhile, as Trump's crusade against immigrants, especially Hispanic, continues - the lower wage labor shortages are likely to reach crisis level. To give an example - as cited by Lauren Weber- the scale of the problem is already such that some growers, e.g. in CA, FL, have discarded portions of their harvest. They have no choice if they are unable to get the workers to do the harvesting.

Added to this, temporary workers across the board are more consistently demanding higher wages and full time work. This according to Rachel Chapman, owner of a staffing office in Huntsville, AL. The problem is that most of her clients can't afford to pay the $12 /hour now demanded.

What seems ever clearer to me is that employers who could formerly pick their workers at their leisure and fire them for the slightest infraction, will now have to vigorously compete to fill positions. That also means paying them what they are really worth instead of stiffing them.

About Me

Specialized in space physics and solar physics, developed first astronomy curriculum for Caribbean secondary schools, has written thirteen books - the most recent:Fundamentals of Solar Physics. Also: Modern Physics: Notes, Problems and Solutions;:'Beyond Atheism, Beyond God', Astronomy & Astrophysics: Notes, Problems and Solutions', 'Physics Notes for Advanced Level&#39, Mathematical Excursions in Brane Space, Selected Analyses in Solar Flare Plasma Dynamics; and 'A History of Caribbean Secondary School Astronomy'. It details the background to my development and implementation of the first ever astronomy curriculum for secondary schools in the Caribbean.